5. CREDIT RISK - DZ BANK Gruppe

DZ BANK 

2012 ANNUAL REPORT 

GROUP MANAGEMENT REPORT 

Opportunities and risks associated with forecast development 

101 

Solvency II 

For a number of years, the EU Commission has been 

carrying out detailed work on a new regulatory model 

for insurance companies with the working title of 

Solvency II. 

The Solvency II Directive of the European Parliament 

and of the European Council was adopted on November 

25, 2009. As things stand at the moment from 

a legal perspective, transposition into national law is 

expected to take place from 2013 onward. However, 

there is still a considerable lack of clarity surrounding 

key issues relating to risk assessments. One of the 

core concerns as far as the German insurance industry 

is concerned is the issue of an appropriate assessment 

of long-term guarantees. Given the prevailing situation, 

the European Parliament and the European Council 

are proposing that implementation be postponed for a 

number of years. A new implementation date is expected 

to be agreed in the near future. 

As a result of internal projects and working group activities, 

and by virtue of its involvement in working 

groups set up by Gesamtverband der Deutschen Versicherungswirtschaft 

e.V. (GDV) [German Insurance 

Association] and BaFin, R+V is well prepared for the 

future challenges and is putting in place the foundations 

for successful implementation of the Solvency II 

requirements. This also includes active participation in 

the studies being carried out as part of the European 

insurance regulator’s Solvency II project (quantitative 

impact studies, long-term guarantees assessment by 

the European insurance regulator). In addition, R+V 

regularly organizes its own groupwide assessments 

based on the latest state of development in order to 

ensure that it is adequately prepared for the new Solvency 

II regulatory regime. 

5. CREDIT RISK 

5.1. Definition and causes 

5.1.1. Definition 

Credit risk is defined as the risk of losses arising from 

the default of counterparties (borrowers, issuers, other 

counterparties) or the loss of value caused by migration 

of a borrower’s credit rating. 

Credit risk may arise in traditional lending business 

and also in trading activities. Traditional lending 

business is for the most part commercial lending, 

including financial guarantee contracts and loan commitments. 

In the context of credit risk management, 

trading activities refers to capital market products 

such as securities (in both the banking book and the 

trading book), promissory notes, derivatives, secured 

money market business (such as sale and repurchase 

agreements, referred to below as repo transactions), 

and unsecured money market business. 

In traditional lending business, credit risk arises in 

the form of default risk. In this context, default risk 

refers to the risk that a customer may be unable to 

settle receivables arising from loans or advances made 

to the customer (including lease receivables) or make 

overdue payments, or that losses may arise from contingent 

liabilities or from lines of credit committed to 

third parties. 

Credit risk in connection with trading activities arises 

in the form of default risk that can be subdivided 

into replacement risk, issuer risk, and settlement risk, 

depending on the type of business involved. 

Replacement risk on derivatives is the risk of counterparty 

default during the maturity of a trading transaction 

where companies in the DZ BANK Group can only 

enter into an equivalent transaction with another counterparty 

if they incur an additional expense in the amount of 

the positive fair value at the time of the default. 

Issuer risk is the risk is of incurring losses from the 

default of issuers of tradable debt or equity instruments 

(such as bonds, shares, profit-participation certificates), 

losses from a default in connection with the underlying 

instrument in derivatives (for example, credit or equity 

derivatives), or losses from a default in connection with 

fund components. 

Settlement risk arises in connection with trading 

transactions that are not processed concurrently.

102 DZ BANK 




The risk is that counterparties do not meet their 

obligations, counter-performance already having 

taken place. 

Country risk is treated as a risk subcategory within 

credit risk. 

Country risk in the narrower sense of the term refers 

to conversion, transfer, payment prohibition, or 

moratorium risk. It is the risk that a foreign government 

may impose restrictions preventing a debtor in 

the country concerned from transferring funds to a 

foreign creditor. 

In the broader sense of the term, country risk forms 

part of credit risk. In this case, it refers to the risk 

arising from exposure to the government itself (sovereign 

risk) and the risk that the quality of the overall 

exposure in a country may be impaired as a result 

of country-specific events. 

5.1.2. Causes 

Credit risk from traditional lending business arises 

primarily at DZ BANK, BSH, DG HYP, DVB, 

TeamBank, and VR-LEASING AG. The risk results 

from the specific transactions in each company and 

therefore has varying characteristics in terms of diversification 

and size in relation to the volume of 

business. 

Credit risk from trading activities arises particularly at 

DZ BANK, BSH, DG HYP, and DZ PRIVATBANK 

S.A. Replacement risk and settlement risk arise largely 

in connection with DZ BANK’s trading activities. 

Issuer risk results mainly from the trading activities 

and investment business conducted by DZ BANK, 

BSH, DG HYP, and DZ PRIVATBANK S.A. BSH, 

DG HYP, and DZ PRIVATBANK S.A. only incur 

credit risk on banking book trading activities. 

5.2. Risk strategy 

The DZ BANK Group pursues a strictly decentralized 

business policy aimed at promoting the cooperative 

banks and is bound by the core strategic guiding principle 

of ‘a network-oriented central institution and 

financial services group’. The business and risk policy 

for the credit-risk-bearing core businesses in the group 

is formulated on the basis of risk-bearing capacity. 

The credit risk strategy therefore forms the basis for 

credit risk management and reporting across the whole 

group and ensures that there is a standard approach 

to credit risk within the group. 

Lending throughout the group is predominantly 

based on the ‘VR rating’ system, a rating procedure 

developed by DZ BANK in collaboration with the 

BVR and WGZ BANK. 

Both DZ BANK and the subsidiaries with a material 

credit risk seek to maintain a good rating structure 

in their credit portfolios at all times. In the future, 

the portfolios will continue to be characterized by a 

high degree of diversification. In the case of an individual 

lending transaction, risk-adjusted pricing of 

the financing taking into account adequate standard 

risk costs and risk-adjusted economic capital costs is 

of critical importance. 

The following key aspects of DZ BANK’s credit risk 

strategy were modified in the year under review: 

– Growth targets were adjusted. DZ BANK is striving 

for an increase in lending volume focusing on 

business with SMEs. 

– The bank adopted the principle that loans to 

customers with revenue of up to €50 million 

should generally only be granted in the form 

of loans jointly extended with other parties. 

– The generally accepted minimum credit ratings 

and the credit rating requirements in respect 

of limits for trading activities with institutional 

clients were extended. 

– Corporate banking was realigned. Whereas business 

with SMEs focuses exclusively on jointly extended 

loans, corporate banking concentrates on mediumsized 

companies and large companies. 

– Portfolio targets in project finance business were 

specified in more detail with the aim of establishing 

a focus for growth in the collaboration within the 

cooperative financial network.





103 

The adopted minimum credit rating was also 

restricted in respect of the consumer finance business 

at TeamBank. 

Where required, the Board of Managing Directors of 

DZ BANK makes decisions during the course of the 

year to ensure that the rules for the medium-term and 

long-term credit risk strategy are adjusted in line with 

changing circumstances and current developments. 

5.3. Organization, responsibility, 

and risk reporting 

Responsibilities in the lending process have been 

defined and are documented in a written set of 

procedural rules. These responsibilities cover loan 

applications, approvals, and processing, including 

periodic credit control with regular analysis of 

ratings. Decision-making authority levels are specified 

by the relevant rules based on the risk content 

of lending transactions. 

Established reporting and monitoring processes help 

provide information for decision-makers on changes 

in the risk structure of credit portfolios and form the 

basis for the active management of credit risks. 

As part of the reporting system, the Group Risk 

Committee is kept informed of the economic capital 

required to cover credit risks. Internal reporting also 

includes an in-depth analysis of the portfolio structure 

in regard to concentration risk based on key risk 

characteristics such as country, industry, and credit 

rating class, and on the lending volume to individual 

customers. In addition, the reports include details on 

specific exposures and specific loan loss allowances. 

5.4. Risk management 

5.4.1. Rating systems 

Rating system characteristics 

The VR rating system used as standard throughout 

the cooperative financial network ensures that all the 

entities in the network apply a sophisticated uniform 

methodology producing ratings that are comparable. 

DZ BANK primarily uses VR rating systems as part 

of its credit risk management system to assess large 

and medium-sized companies, major corporate customers, 

banks, and countries, as well as project finance, 

asset finance, acquisition financing, and investment 

funds. The internal assessment approach is also used to 

evaluate the liquidity lines and credit enhancements 

made available by DZ BANK to programs for the issuance 

of asset-backed commercial paper (ABCP). 

These rating systems have been approved by BaFin for 

the purposes of calculating regulatory capital using 

the foundation IRB approach. 

For internal management purposes, further rating systems 

are used to assess SMEs, agricultural businesses, 

public-sector entities, foreign SMEs, and investment 

funds. Although these systems satisfy the requirements 

for the foundation IRB approach in the opinion 

of DZ BANK, they are deemed to be of less significance 

and have not yet been reviewed by the regulator. 

Development of rating systems 

The rating systems for acquisition finance and project 

finance were revised and implemented during 2012. 

The rating system for major corporate customers was 

revised and will be implemented during 2013. BaFin 

has issued confirmation that the rating system for asset 

finance is suitable for the IRB approach. BaFin has 

also approved the investment fund rating system as 

suitable for determining the regulatory capital requirement. 

Since the fourth quarter of 2012, DG HYP 

has been conducting an application test for a newly 

developed rating system covering open-ended realestate 

funds. It is planned to submit this system to 

BaFin in 2013 for approval of its suitability for the 

IRB approach. 

DZ BANK credit rating master scale 

The credit rating master scale serves as a groupwide 

rating benchmark with which to standardize the 

different rating systems used by the companies in the 

DZ BANK Group as a result of differences in their 

business priorities. It thereby provides all group companies 

with a consistent view of counterparties’ credit 

ratings.





Figure 13 shows DZ BANK’s credit rating master 

scale, in which internal credit ratings are matched 

to the ratings used by Moody’s, Standard & Poor’s, 

and Fitch. It should be noted that some internal ratings 

cannot be matched with a particular external rating 

because of the greater degree of refinement in the credit 

rating master scale. In DZ BANK’s master scale, the 

default bands remain unchanged to ensure comparability 

over the course of time, whereas some fluctuation in 

default rates can be seen in external ratings. Therefore, 

it is not possible to map the internal ratings directly to 

the ratings used by the rating agencies. The scale can 

thus only be used as a starting point for a comparison 

between internal and external credit ratings. 

FIG. 13 – DZ BANK credit rating master scale and external credit ratings 

External rating classes 

Internal 

rating classes 

Average default 

probability 

Moody’s Standard & Poor’s Fitch 

Rating category 

1A 0.01% Aaa to Aa2 AAA to AA AAA to AA 

1B 0.02% Aa3 AA- AA- 

1C 0.03% 

1D 0.04% A1 A+ A+ 

1E 0.05% 

2A 0.07% A2 A A 

2B 0.10% A3 A- A- 

2C 0.15% Baa1 BBB+ BBB+ 

2D 0.23% Baa2 BBB BBB 

2E 0.35% 

3A 0.50% Baa3 BBB- BBB- 

3B 0.75% Ba1 BB+ BB+ 

3C 1.10% Ba2 BB BB 

3D 1.70% 

3E 2.60% Ba3 BB- BB- 

4A 4.00% B1 B+ B+ 

4B 6.00% B2 B B 

4C 9.00% B3 B- B- 

4D 13.50% 

4E 30.00% Caa1 to C CCC+ to C CCC+ to C 

Investment grade 

Non-investment grade 

5A 

5B 

5C 

5D 

5E 

Past due 

> 90 days 

Specific loan 

loss allowance 

Exemption from 

interest/ 

debt restructuring 

Insolvency 

Compulsory 

winding-up/ 

derecognition 

Default





105 

DZ BANK rating desk 

The VR rating systems for banks and countries are also 

available to DZ BANK subsidiaries and the cooperative 

banks. Users can enter into a master agreement to 

access the ratings via an IT application (Rating Desk), 

which is available throughout the cooperative financial 

network, in return for the payment of a fee. Any accessed 

ratings are first validated by the companies in 

the DZ BANK Group or the cooperative banks before 

they are included in the user’s credit procedures. 

5.4.2. Pricing in the lending business 

To ensure that lending business remains profitable, 

standard risk costs are determined in the management 

of individual transactions in many parts of the group. 

The purpose of these costs is to cover average expected 

losses from borrower defaults. The aim is to ensure 

that the net allowances for losses on loans and advances 

recognized in the financial statements are covered on 

average over the long term in an actuarial-type approach 

by the standard risk costs included in the pricing. 

In addition to standard risk costs, an imputed cost 

of capital based on the economic capital requirement 

is integrated into DZ BANK’s contribution margin 

costing. In this way, DZ BANK obtains a return on 

the economic capital tied up that is in line with the 

risk involved and that covers any unexpected losses 

arising from the lending business. At the same time, 

pricing also includes an appropriate amount to cover 

the costs of risk concentration. The methods used 

by the companies in the group to manage individual 

transactions vary according to the particular features 

of the product or business concerned. 

5.4.3. Management of exposure in the 

traditional lending business 

Measuring exposures in traditional lending business 

Individual lending exposures are managed on the 

basis of an analysis of gross lending exposure. The period 

taken into account in this case is equivalent to the 

monitoring cycle of one year. Together with risk-related 

credit-portfolio management, volume-oriented credit 

risk management is one of the components in the management 

of concentration risk in the lending business. 

In traditional lending business, the credit exposure or 

lending volume is the same as the nominal value of 

the total loan book and reflects the maximum volume 

at risk of default. The credit exposure is a gross value 

because risk-bearing financial instruments are measured 

before the application of any credit risk mitigation 

and before the recognition of any allowances for losses. 

In the case of loans and undrawn loan commitments, 

the gross lending volume is based on carrying amounts. 

In the lease business minimum lease payments are 

used as a basis for measuring the gross lending volume, 

while principal amounts are used for this purpose in 

building society operations. In addition, loans and 

advances to customers in building society operations 

are reduced by the associated deposits. The maximum 

credit exposure comprises the total lines of credit 

committed to third parties, or in the case of limit 

overruns, the higher amounts already drawn. 

Limit system for managing exposures in traditional 

lending business 

Limits are set in the relevant group companies for 

individual borrowers and borrower/risk units. Group 

limits are also set at DZ BANK Group level for critical 

counterparties. As a prerequisite for prompt monitoring 

of limits, suitable early warning processes have 

been established in group companies that are of material 

significance for the group’s credit risk. Loan agreements 

frequently include financial covenants that act 

as early warning indicators for changes in credit standing 

and as a tool for proactive risk management. In 

addition, DZ BANK has set up processes to handle 

instances in which limits have been exceeded. The 

main subsidiaries have similar procedures adapted to 

the needs of their particular business models. Country 

exposure in the traditional lending business is managed 

by setting limits for countries at the DZ BANK 

Group level. 

5.4.4. Management of credit exposure in trading 

transactions 

Measuring credit exposure in trading transactions 

Replacement risk, settlement risk, and issuer risk are 

exposure-based measurements of the maximum potential 

loss in trading transactions. These are determined 

without taking into account the likelihood of a default.





In order to determine the credit exposure, securities in 

the banking book and trading book are predominantly 

measured at fair value (nominal amounts are used in 

building society operations) and derivatives at a loan 

equivalent value. 

Replacement risk on OTC derivatives and unsecured 

money market transactions is calculated mainly on 

the basis of fair value and the add-on for an individual 

transaction. The add-on takes into account specific 

risk factors and residual maturities. Where legally 

enforceable, netting agreements and collateral agreements 

are used at counterparty level to reduce exposure. 

In the case of repos, haircuts are applied instead 

of add-ons. 

As regards settlement risk, the amount to be set aside 

is deemed to be the amount owed, i.e. the amount 

actually due to be paid by the counterparty to 

DZ BANK. Settlement risk is recognized for the 

specified settlement period. 

At group level, issuer risk is determined on the basis of 

the fair value of securities positions. Risks relating to 

the underlying instruments in derivative transactions 

are also included in issuer risk. 

Limit system for managing trading exposure 

DZ BANK has established an exposure-oriented limit 

system to limit the credit risk arising from trading 

business. Replacement risk is managed via a structure 

of limits broken down into maturity bands. Unsecured 

money market transactions are subject to separate limits. 

A daily limit is set in order to manage settlement 

risk. A specific limit related to credit ratings or a fixedterm 

general limit is determined for each issuer as the 

basis for managing issuer risk. Pfandbriefe are subject 

to separate limits. Material subsidiaries have their own 

comparable limit systems. 

Exposure in connection with DZ BANK’s trading 

business is measured and monitored using a standard 

method and a central, IT-supported limit management 

system to which all relevant trading systems are connected. 

The trading exposure for the group is also 

aggregated by the same IT system. 

As in the traditional lending business, appropriate 

processes have also been established for the trading 

business to provide early warnings and notification of 

limit overruns. The member of the Board of Managing 

Directors responsible for risk monitoring is sent a 

daily list of significant exceeded trading limits. A 

monthly report is prepared for the total exposure from 

trading business. 

Country exposure in the trading business is managed 

in the same way as in the traditional lending 

business by setting limits for countries at the 

DZ BANK Group level. 

5.4.5. Management of risk concentration 

and correlation risks 

Concentrations of risk in credit and collateral 

portfolios 

In managing the traditional lending business and its 

trading business, DZ BANK takes into account the 

correlation of collateral and the borrower pledging the 

collateral. If there is a significant positive correlation 

between the collateral and the borrower pledging the 

collateral, the collateral is disregarded or accorded a 

reduced value as collateral. This situation arises, for 

example, where a guarantor, garnishee, or issuer forms 

an economic entity with the borrower or, together 

with the borrower, represents a single borrower as 

defined by section 19 (2) KWG. 

Correlation risk 

Correlation risk can arise due to the inter-relationship 

between the default probability of counterparties 

and the general market risk (‘general wrong-way risk’). 

Another type of correlation risk, called a ‘specific 

wrong-way risk’, occurs if the value of an exposure to 

a counterparty is negatively correlated to the counterparty’s 

rating owing to the specific transaction structure 

involved. 

Given the nature of trading business at DZ BANK, 

specific wrong-way risk arises largely in connection 

with repos and credit derivatives, in which the counterparty 

and underlying transaction form part of the 

financial sector. This risk is not material as far as





107 

DZ BANK is concerned because of the measures 

described below. 

Measures to prevent concentration risk 

and CORRELATION RISK 

In order to avoid unwanted risks that may arise from 

the concentration of collateral in the trading business 

and correlations between default risk in trading transactions 

and market risk, DZ BANK has brought into 

force an effective policy on collateral and its own internal 

‘minimum requirements for repos and securities 

lending transactions’. 

These requirements are based on the Credit Support 

Annex (ISDA Master Agreement) and the Collateralization 

Annex (German Master Agreement for 

Financial Futures) and stipulate that only collateral 

in the form of cash (mainly in euros or US dollars), 

investment-grade government bonds, and/or 

Pfandbriefe can usually be used for mitigating risks 

arising from OTC derivatives. High-grade collateral 

is also required for repo transactions in compliance 

with the DZ BANK’s own internal minimum 

requirements and the generally accepted master 

agreements, although the range of collateral is somewhat 

broader here than in the case of 

OTC derivatives. 

Concentration risk and correlation risk in connection 

with securities is largely prevented by applying the 

collateral policy from the outset. DZ BANK has also 

put in place its own ‘minimum requirements for bilateral 

reverse repos and securities lending transactions’. 

These minimum requirements exclude prohibited concentrations 

and correlations and specify collateral 

quality depending on the credit rating of the counterparties. 

To monitor the relevant rules and regulations, 

the bank has set up a separate reporting system involving 

daily monitoring and a half-yearly report to the 

Credit Committee. 

Specific wrong-way risk in connection with credit 

derivatives in which the counterparty and underlying 

instrument form part of the financial sector is notified 

to the Credit Committee in a quarterly report and is 

of minor significance. 

5.4.6. Minimizing credit risk 

Collateral strategy and secured transactions 

In accordance with the DZ BANK Group’s credit risk 

strategy, customer credit quality forms the basis for 

any lending decision; collateral has no bearing on the 

borrower’s credit rating. However, depending on 

the structure of the transaction, collateral may be of 

material significance in the assessment of risk in a 

transaction. 

The DZ BANK Group generally seeks to obtain collateral 

in line with the level of risk in medium-term 

or long-term financing arrangements. In particular, 

recoverable collateral equivalent to 50 percent of the 

finance volume is required for new business with 

SME customers in rating category 3D or below on 

the credit rating master scale. 

Collateral is used as an appropriate tool for the management 

of risk in export finance or structured trade 

finance transactions. In the case of project finance, 

the financed project itself or the assignment of the 

rights in the underlying agreements typically serve as 

collateral. 

Secured transactions in traditional lending business 

encompass commercial lending including financial 

guarantee contracts and loan commitments. Decisions 

to protect transactions against credit risk are made 

on a case-by-case basis, the protection taking the form 

of traditional collateral. 

Types of collateral 

The DZ BANK Group uses all forms of traditional 

loan collateral. Specifically, these include mortgages on 

residential and commercial real estate, registered ship 

mortgages, guarantees (primarily in the form of sureties, 

indemnity agreements, credit insurance, and letters 

of comfort), financial security (cash deposits, certain 

fixed-income securities, shares, and investment fund 

units), assigned receivables (blanket and individual assignments 

of trade receivables), and physical collateral. 

Privileged mortgages, guarantees, and financial collateral 

are the main sources of collateral recognized for





regulatory purposes under SolvV. Assigned receivables 

and physical collateral are only recognized for regulatory 

purposes to a limited extent. 

In accordance with DZ BANK’s collateral policy, 

only cash, investment-grade government bonds, and/ 

or Pfandbriefe are accepted as collateral for trading 

transactions required by the collateral agreements 

used to mitigate against the risk attaching to OTC 

derivatives. DZ BANK also enters into netting agreements 

to reduce the credit risk arising in connection 

with OTC derivatives. The prompt evaluation of collateral 

within the agreed margining period also helps 

to limit risk. 

In order to reduce the issuer risk attaching to bonds 

and derivatives, use is made of credit derivatives, comprising 

credit-linked notes, credit default swaps, and 

total return swaps. Macrohedges are used dynamically 

to mitigate spread risk and risks attaching to underlying 

assets. In isolated cases, transactions are conducted 

on a back-to-back basis. For risk management purposes, 

the protection provided by credit derivatives is 

set against the reference entity risk, thereby mitigating 

it. The main protection providers/counterparties in 

credit derivatives are financial institutions, mostly investment-grade 

banks in the VR rating classes 

1A to 2C. 

Management of traditional loan collateral 

Collateral management is primarily the responsibility 

of specialist units outside the front-office divisions. 

The core tasks of these units include providing, inspecting, 

measuring, recording, and managing collateral 

and providing advice to all divisions in matters 

concerning collateral. 

To a large extent, standardized contracts are used for 

the provision of collateral and the associated declarations. 

Specialist departments are consulted in cases 

where customized collateral agreements are required. 

Collateral is managed in separate IT systems. 

Collateral is measured in accordance with internal 

guidelines and is the responsibility of back-office 

units. As a minimum, carrying amounts are reviewed 

on the monitoring dates specified by the back-office 

units – normally annually – or on the agreed submission 

date for documents relevant to measurement of 

the collateral. Shorter monitoring intervals may be 

specified for critical lending exposures. Regardless of 

the specified intervals, collateral is tested for impairment 

without delay if any indications of impairment 

become evident. 

The workout units are responsible for processing collateral 

for non-performing loans including the recovery 

of collateral. In the case of non-performing loans, 

the collateral is measured on the basis of its likely recoverable 

value and time of recovery, rather than on 

the basis of the general measurement guidelines. In 

another departure from the general collateralization 

criteria, collateral involved in restructuring exposures 

can be measured using market values or the estimated 

liquidation proceeds. 

Collateral management 

In addition to netting agreements (ISDA Master 

Agreement and German Master Agreement for 

Financial Futures), DZ BANK enters into collateral 

agreements (Credit Support Annex to the ISDA 

Master Agreement and Collateralization Annex to the 

German Master Agreement for Financial Futures) as 

instruments to reduce credit exposure in OTC 

transactions. 

DZ BANK’s policy on collateral regulates the content 

of collateral agreements and the responsibilities and 

authorities for implementing the rights and obligations 

they confer within the bank. This policy specifies contract 

parameters, such as the quality of collateral, 

frequency of transfer, minimum transfer amounts, and 

thresholds. DZ BANK regularly uses bilateral collateral 

agreements. Exceptions apply to cover assets and 

special purpose entities, as the special legal status of 

the counterparties means that only unilateral collateral 

agreements can be usefully enforced, and to supranational 

or government entities. Any decision not to use 

a bilateral collateral agreement must be approved by a 

person with the relevant authority. Netting and collateralization 

generally result in a significant reduction 

in the exposure from trading business. IT systems are 

used to measure exposures and collateral. Margining is 

carried out on a daily basis for the vast majority of





109 

collateral agreements in accordance with the collateral 

policy. 

Collateral agreements entered into by DZ BANK generally 

include thresholds and minimum transfer 

amounts that are independent of credit rating. There 

are also some agreements with rating-based triggers. 

In these agreements, the unsecured part of an exposure 

is reduced in the event of a deterioration in credit 

quality or the borrower is required to make additional 

payments (for example, payments known as ‘independent 

amounts’). Rating-dependent payment obligations 

are treated as low risk and are covered by liquidity 

risk management. 

Central counterparty clearing (CCP) 

The European Market Infrastructure Regulation 

(EMIR) is permanently changing the environment in 

which banks, insurance companies, and investment 

funds conduct OTC derivative transactions. Under 

this regulation, market players must trade certain 

standardized derivatives in the future using central 

counterparties (known as clearing houses) and report 

these contracts in a central transaction register. This 

is intended to minimize counterparty risk. 

Any market players not exempted from this new clearing 

obligation must be connected to a central counterparty. 

The market player concerned may be a direct 

member of a clearing house or may process its derivative 

contracts using a bank that is a member of the 

central counterparty. Since July 2011, DZ BANK has 

been a direct member of Europe’s largest clearing 

house for interest-rate derivatives, the London Clearing 

House (LCH). It therefore has direct access to 

a central counterparty for derivatives for the purposes 

of clearing its own derivative positions. 

5.4.7. Management of non-performing exposures 

Managing and monitoring non-performing exposures 

Identified non-performing loans are transferred to 

the workout units at an early stage. By providing 

intensified loan management for critical exposures 

and applying appropriate solutions, these special 

units lay the basis for securing and optimizing nonperforming 

risk positions. 

In the traditional lending business, DZ BANK has a 

comprehensive range of tools at its disposal for the 

early identification, close support, and high-quality 

monitoring of non-performing exposures. The subportfolio 

of non-performing loans is reviewed, updated, 

and reported on a quarterly basis. The process 

is also carried out at shorter intervals if required. This 

process is comprehensively supported by IT systems. 

A key element is the internal reporting system, which 

is informative, target-group-oriented, and timely. 

If necessary, the intensified loan management put in 

place for individual borrowers is transferred to task 

forces specially set up for this purpose. The risks in 

subportfolios are monitored and analyzed with regular 

reports. 

Where required, similar procedures have been implemented 

in the main subsidiaries, where they are 

adapted to the characteristics of the risks faced by each 

particular business. 

Guidelines and procedures for the recognition of 

PROVISIONS, impairment losses, and allowances for 

losses on loans and advances 

The following descriptions apply to DZ BANK. 

The main subsidiaries have implemented comparable 

guidelines on the recognition of provisions, impairment 

losses, and allowances for losses on loans 

and advances adapted in line with their respective 

business activities. 

A transaction is deemed to be ‘past due’ if interest 

payments, repayments of principal, or settlements 

of other receivables are more than one day in arrears. 

A borrower is classified as a ‘default’ if the borrower 

is not expected to meet his/her payment obligations 

in full without the need for action such as the recovery 

of any available collateral. Regardless of this definition, 

a borrower is classified as in default according 

to SolvV criteria if payments are past due by more 

than 90 days. 

If there is objective evidence that the value of repayments 

under loans is impaired, a review is carried out 

to establish whether it is likely that the borrower will 

not meet his/her contractual obligations in full and 

whether a financial loss could be incurred. Specific





loan loss allowances are recognized for the difference 

between the carrying amount of the loan or advance 

and the net present value of the anticipated payments, 

including any proceeds from the recovery of collateral. 

Provisions are recognized for loan commitments 

and for liabilities under financial guarantee contracts 

in an amount equivalent to the difference between 

the present value of the potential default amount and 

the present value of expected payments, provided 

that it is probable the obligation will be actually 

incurred. 

If no specific allowances are recognized for losses on 

payments due under loans or if there are no provisions 

for loan commitments or liabilities under financial 

guarantee contracts, then these transactions are recognized 

in the portfolio loan loss allowance. As soon as 

an impairment becomes apparent or a transaction is 

identified as requiring a provision or liability, it is 

derecognized from the portfolio and recognized as a 

specific loan loss allowance. The calculation of the 

portfolio loan loss allowance is based on the calculation 

of expected losses used for regulatory purposes. 

Latent country risk is recognized in the portfolio loan 

loss allowances. 

In trading units, derivatives business and parts of 

the securities and money market business are measured 

at fair value through profit or loss. Any impairment 

is therefore immediately recognized in the 

income statement and the balance sheet, precluding 

the need for the recognition of any allowances for 

losses. For securities and money market placements 

that are recognized at amortized cost or fair value 

through other comprehensive income, impairment 

losses are determined using the same procedure as 

that for loans. 

BSH, DG HYP, DZ BANK Polska, TeamBank, and 

VR-LEASING AG recognize specific loan loss allowances 

evaluated on a group basis for their retail 

business in addition to specific loan loss allowances. 

These specific loan loss allowances evaluated on 

a group basis are based on cash flows from credit 

portfolios with the same risk characteristics analyzed 

using migration scenarios and probabilities of 

default. 

5.4.8. Credit-portfolio management 

In risk-related credit-portfolio management, a distinction 

is made between the expected loss and unexpected 

loss arising from the credit portfolio as a 

whole. The calculation of an expected loss for each 

individual transaction prevents a creeping erosion of 

equity. Most of the companies in the group determine 

the standard risk costs necessary for this calculation. 

These costs vary according to credit rating. 

Portfolio models are also used together with value-atrisk 

methods to quantify unexpected losses that may 

arise from the credit portfolios of group companies. 

Credit value-at-risk describes the risk of unexpected 

losses arising should a default event occur in the credit 

portfolio. Credit value-at-risk is measured using credit 

portfolio models that take into account industry and 

counterparty concentrations and also reflect the credit 

rating structure of the credit portfolio. The measurement 

includes credit risk from both lending and trading 

businesses. 

In the first half of 2012, the calculation of the risk 

capital requirement for credit risk at DZ BANK was 

switched to a portfolio model based on the concept 

of CreditMetrics. The effect of this switch on the 

overall amount of the risk capital requirement was 

minimal. On December 31, 2012, DG HYP also 

made a corresponding switch in the method used. The 

improvement in the representation of risk concentrations 

and industry correlations led to a reduction in 

the risk capital requirement. 

5.4.9. Managing credit risk arising from 

securitizations 

Objectives and scope of securitization 

During the course of the financial crisis, the DZ BANK 

Group ceased all its securitization activities except for 

those in a few, clearly defined areas of business. Areas 

where such activity has continued include the ABCP 

programs, although investment in ABSs has been halted.





111 

The following details describe the management of 

credit risk in the securitization business still remaining. 

The objective of the companies in the DZ BANK 

Group in their role as originators of long-term funded 

securitizations is to transfer risk, thereby releasing economic 

and regulatory capital. 

As a sponsor, DZ BANK also uses special-purpose 

entities, which are funded by issuing money marketlinked 

ABCP. The ABCP programs are predominantly 

made available for DZ BANK customers who then 

securitize their own assets via these companies. In 

these programs, the customers sell their assets to a separate 

special-purpose entity, the consideration normally 

including an adjustment for risk. The purchase 

of the assets is funded by issuing money market-linked 

ABCP. The redemption of the ABCP is covered by the 

entire asset pool in the program. The contractual 

structure of the transactions ensures that the assets do 

not form part of the asset seller’s net assets if the asset 

seller should become insolvent. 

The CORAL ABCP program has been set up to provide 

securitization of assets from European companies. 

This program is partially funded by liquidity lines 

but DZ BANK is seeking to extend the funding using 

ABCP. 

DZ BANK is also the sponsor of the AUTOBAHN 

ABCP program, which offers securitization for assets 

from North American customers and is mainly funded 

by ABCP issues. 

Figure 14 shows the main exposures held by the companies 

in the DZ BANK Group as originators and 

sponsors. From a regulatory perspective, the securitizations 

are transactions that need to be backed by 

capital. 

DZ BANK’s investor-related exposures are assigned 

to the banking book, and to a lesser extent to the trading 

book, and are actively managed with the aim of 

scaling back the portfolio and reducing risk. The action 

taken to achieve this aim includes the disposal of 

selected exposures, not only to reduce risk but also to 

optimize equity. 

In addition to these activities, DZ BANK arranges 

and places securitizations issued by the DZ BANK 

Group and the Volksbanken Raiffeisenbanken cooperative 

financial network. The local cooperative banks 

are involved in one multi-seller transaction undertaken 

by the DZ BANK Group. 

Causes of risk 

Credit risk in connection with securitizations in the 

banking book arises primarily from investments in 

securitizations, the provision of liquidity facilities for 

ABCP, and the necessary retention of securitization 

tranches that DZ BANK issues itself. The liquidity 

facilities provided as part of the ABCP programs are 

managed in the banking book. The resulting risk 

largely depends on the quality of the asset pool. 

In the context of the portfolio as a whole, the re-securitization 

exposures and related risks are of minor 

significance. Re-securitizations are structures in which 

the securitized exposure in turn comprises one or 

more other securitization exposures. 

Organization, responsibility, and risk reporting 

Exposures to asset-backed securities (ABSs), which for 

the DZ BANK Group constitute investor-related exposures 

within the meaning of KWG, are managed by 

the relevant group companies and are subject to the 

groupwide risk management standards. These standards 

require that securitization exposures be individually 

analyzed and limited. 

The structure of transactions is analyzed, a comparison 

is made between the transactions and the relevant 

ABS market, and the external credit ratings awarded 

by the rating agencies are validated as part of a wellestablished 

process. Furthermore, all major ABS asset 

classes are subjected to an annual portfolio analysis 

process that assesses the macroeconomic and assetclass-specific 

risks involved. 

Portfolio risk exposures are reported once a month at 

group level to the DZ BANK Group’s credit management 

function and to DZ BANK’s Board of Managing 

Directors; this reporting process covers the group’s 

aggregate risk exposure. This enables the group to 

manage the risks it incurs from structured products.





FIG. 14 – SECURITIZATION EXPOSURES OF THE COMPANIES IN THE DZ BANK GROUP IN THEIR CAPACITY AS ORIGINATORS 

AND SPONSORS 

Company & 

transaction 

Type of 

transaction 

Role 

Purpose of 

transaction 

Type of 

assets 

Volume 1 Retained exposures Comments 

(Dec. 31, 

2012) 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 


CORAL 

AUTOBAHN 

ABCP 

conduit 

Sponsor 

Generation 

of 

commission 

income 

Loans and 

advances to 

European 

corporates 

and an ABS 2 

exposure 

Loans and 

advances to 

North 

American 

customers 

€0.7 billion €0.9 billion 


Commitments 

of 

€0.7 billion, 

€0.54 billion 

of which 

has been 

utilized 

Commitments 

of 


none 

of which 

has been 

utilized 

Commitments 

of 



of which 

has been 

utilized 

Commitments 

of 



of which 

has been 

utilized 

Provision 

of 

liquidity 

lines 

DG HYP 

Mortgagebacked 

PROVIDE VR 

PROSCORE 

VR 

Synthetic 

RMBSs 2 

Synthetic 

CMBSs 2 

Originator 

Optimization 

of capital 

employed; 

reduction of 

credit risk 

real-estate 

loans in 

German 

retail 

business 

Mortgagebacked 

real-estate 

loans to 

corporates in 

Germany 



Exposure of 

€24 million 

Exposure of 

€9 million 

Exposure of 

€24 million Including 

first-loss 

pieces for 

which 

adequate 

impairment 

losses have 

been 

Exposure of 

recognized 

€10 million 

VR-LEASING 

CORAL 3 

Lease 

securitization 

Originator 

Lease 

receivables 

from 

corporates in 

Germany 


Capital and 

liquidity 

management; 

transfer of 

risk 

Credit 

enhancements 

amounting 

to 

€10 million 

Credit 

enhancements 

amounting 

to 

€16 million 

Credit 

enhancements 

not 

hedged 

1 Disclosures before consolidation 

2 ABSs = asset-backed securities; CMBSs = commercial mortgage-backed securities; RMBSs = residential mortgage-backed securities 

3 Contained in DZ BANK’s CORAL program





113 

Risk monitoring and stress tests 

Securitization exposures are monitored independently 

of whether they are assigned to the banking book or 

the trading book. Besides continuous monitoring of 

external credit ratings, exposures are classified on a 

quarterly basis using stress tests specific to each asset 

class. A particular feature of the tests is that factors 

such as payment delays, defaults, and degree of loss are 

balanced against the existing credit enhancements in 

each transaction. If an exposure does not pass a stress 

test, the expected loss is determined using a model 

particular to the asset class concerned. 

The credit risk arising in connection with the transactions 

in the ABCP programs is monitored using performance 

reports prepared at least monthly by the asset 

seller. The purchased assets are generally subject to 

a due diligence in the form of regular random sample 

tests. 

Re-securitization exposures are monitored in much 

the same way as other asset classes. Expected losses on 

these exposures are modeled using portfolio models 

from rating agencies which particularly factor in the 

range of ratings in the securitized portfolio and the 

assumptions made by the agencies with regard to the 

extent of losses and industry correlations. 

The economic stress tests encompass both the credit 

risk and the spread risk arising from the DZ BANK 

Group’s entire securitization exposures. 

Risk mitigation 

In a small number of individual cases, DZ BANK uses 

credit default swaps to mitigate the risk from individual 

exposures. The counterparties in these derivatives 

are investment-grade financial institutions. As part of 

the ABCP programs managed exclusively in the banking 

book, the risk arising from some of the purchased 

asset portfolios is covered by credit insurance in addition 

to the discount on the purchase price already 

referred to above. 

5.5. Lending volume 

5.5.1. Classes and concentrations 

The lending volume is determined in accordance with 

the DZ BANK Group’s internal management procedure 

for credit-risk-bearing instruments – traditional 

lending, securities business, and derivatives and money 

market business. This breakdown corresponds to the 

risk classes required for the external reporting of risks 

arising from financial instruments. The credit-riskbearing 

instruments are also classified by sector, country 

group, credit rating, and term to maturity. This 

breakdown highlights any concentrations of volume. 

5.5.2. Reconciliation of lending volume to the 

consolidated financial statements 

Figure 15 shows a reconciliation from the gross lending 

volume used for internal group management to 

individual balance sheet items. There are discrepancies 

between the internal management and external financial 

reporting measurements for some products owing 

to the focus on the risk content of the items. The other 

main reasons for the discrepancies between the internal 

management figures and those in the external 

financial statements are differences in the basis of 

consolidation, differences in the definition of lending 

volume, and various differences in recognition and 

measurement methods. 

Differences in the scope of consolidation result from 

the fact that, in internal risk management, only the 

companies in the DZ BANK Group that contribute 

significantly to the overall risk of the group are 

included. 

With regard to the definition of lending volume, a 

proportion of R+V’s investments that the management 

does not consider to be credit-risk-bearing securities 

business is managed under actuarial risk. This is because 

these asset items largely correspond to insurance 

liabilities. These two items are considered as a whole 

for internal management purposes.





FIG. 15 – RECONCILIATION OF THE LENDING VOLUME 

€ billion 

Lending volume for internal management accounts 

Reconciliation 

Scope of consolidation 

Definition of the 

lending volume 

Carrying amount and 

measurement 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Traditional lending business 206.5 206.3 4.0 4.1 – – 0.3 -0.5 

Securities business 85.1 90.7 0.1 0.3 58.4 52.1 -16.9 -13.0 

Derivatives business 11.3 11.4 – – – – -13.7 -14.7 

Money market business 5.6 6.1 – – – – 28.3 28.1 

Total 308.5 314.5 4.1 4.4 58.4 52.1 -2.1 -0.2 

Balance as at Dec. 31, 2012 60.4 

Balance as at Dec. 31, 2011 56.3 

1 As at December 31, 2012, the investments held by insurance companies recognized in the internal management accounts of the DZ BANK Group amounted to €443 million 

(December 31, 2011: €437 million). In the ‘Definition of the lending volume’ section of the reconciliation, this amount is deducted from the investments held by insurance companies 

that are reported under ‘Lending volume for the consolidated financial statements’.





115 

Lending volume for the consolidated financial statements 

Section 

of notes 

Dec. 31, 2012 Dec. 31, 2011 

210.8 

63.7 

65.2 Loans and advances to banks 

63.9 65.4 of which: loans and advances to banks excluding money market placements 45 

-0.1 -0.2 of which: allowances for losses on loans and advances to banks 47 

121.3 209.9 118.2 Loans and advances to customers 

123.6 120.3 Loans and advances to customers excluding money market placements 46 

-2.4 -2.1 of which: allowances for losses on loans and advances to customers 47 

25.8 26.4 Financial guarantee contracts and loan commitments 79 

67.8 

77.6 Bonds and other securities 

11.2 17.3 of which: financial assets held for trading/bonds excluding money market placements 49 

0.5 2.2 

of which: financial assets held for trading/promissory notes, registered bonds, 

and loans and advances 

49 

56.1 58.1 of which: investments/bonds excluding money market placements 50 

58.8 52.5 Investments held by insurance companies 1 

6.5 5.7 of which: mortgage loans 51 

126.6 

130.1 

9.8 10.5 of which: promissory notes and loans 51 

9.9 10.0 of which: registered bonds 51 

1.6 1.7 of which: other loans 51 

4.5 4.3 of which: variable-yield securities 51 

26.1 19.9 of which: fixed-income securities 51 

0.3 0.2 of which: derivatives (positive fair values) 51 

0.2 0.2 of which: deposits with ceding insurers 51 

-2.4 

-3.3 Derivatives 

0.8 0.9 of which: derivatives used for hedging (positive fair values) 48 

-2.4 36.7 -3.3 32.9 of which: financial assets held for trading/derivatives (positive fair values) 49 

-3.0 -2.6 of which: derivatives used for hedging (negative fair values) 60 

-36.9 -34.6 of which: financial liabilities held for trading/derivatives (negative fair values) 61 

33.9 

34.2 Money market placements 

15.6 14.6 of which: loans and advances to banks/money market placements 45 

0.2 0.5 of which: loans and advances to customers/money market placements 46 

33.9 

34.2 

0.5 0.1 of which: financial assets held for trading/money market instruments 49 

17.3 18.9 of which: financial assets held for trading/money market placements 49 

0.3 0.1 of which: investments/money market instruments 50 

368.9 370.8 Total





The discrepancy in the securities business is mainly 

due to the variations in carrying amounts that arise 

because credit derivatives are offset against the issuer 

risk attaching to the underlying transaction in the 

internal management accounts, whereas such derivatives 

are recognized at their fair value as financial 

assets or financial liabilities held for trading in the 

consolidated financial statements. 

Measurement differences in derivatives business and 

money market business are mainly because countervailing 

positions are offset for the purposes of risk 

management, whereas positions must not be netted in 

this way in the consolidated financial statements. In 

addition, add-ons are attached to the current fair values 

of derivative positions in the internal management 

accounts to take account of potential future changes 

in their fair value. By contrast, the external financial 

statements focus exclusively on the fair values determined 

on the valuation date, and, unlike in the internal 

accounts, collateral must not be recognized for risk 

mitigation purposes. 

In money market business further discrepancies arise 

between the consolidated financial statements and 

internal credit risk reports due to the method in 

which repo transactions are recognized. In contrast 

to the consolidated accounts, collateral provided or 

received for securities is offset against the corresponding 

assets or liabilities in the internal management 

accounts. 

5.5.3. Change in lending volume 

As at December 31, 2012, the total lending volume 

of the DZ BANK Group was down by 2 percent to 

€308.5 billion (December 31, 2011: €314.5 billion). 

Figure 17 shows a breakdown by type of business and 

average lending volume by type of business. The average 

lending volume for the year was determined as the 

arithmetic mean of the balance of loans and advances 

at the end of each quarter in the reporting year. 

Following a contraction at the start of 2012, the volume 

of traditional lending business as at December 

31, 2012 had reached €206.5 billion, around the 

same level as at December 31, 2011 (€206.3 billion). 

The credit quality breakdown within this type of business 

was unchanged year on year. As at December 31, 

2012, loans and advances in the traditional lending 

business were €0.6 billion (December 31, 2011: 

€5.5 billion) or 1 percent (December 31, 2011: 

3 percent) above the average value for the year of 

€205.8 billion. 

The contraction in lending volume within the securities 

business that had begun back in 2007 continued 

in 2012, particularly in the first half of the year. Most 

of this decrease in securities business was attributable 

to the financial sector, although some of the decrease 

was offset by a slight rise in the volume of loans and 

advances to the public sector. As at December 31, 

2012, the credit exposure in the securities business 

amounted to €85.1 billion (December 31, 2011: 

€90.7 billion), 1 percent lower (2011: 2 percent lower) 

than the average for the year of €86.0 billion (2011: 

€92.3 billion). This development is a result of the continued 

reduction in the bond portfolio (the reduction 

focusing increasingly on financial industry securities) 

consistent with corporate strategy since the start of the 

financial crisis in 2007. 

The contraction in lending for derivatives and money 

market operations was mainly attributable to the decline 

in DZ BANK’s derivatives business. In the unsecured 

money markets business, there were marked 

swings in the volume of lending, although these 

swings evened themselves out during the course of the 

year. The average for the derivatives and money market 

business was calculated to be €19.6 billion in 2012 

(2011: €15.3 billion). As at December 31, 2012, total 

volume amounted to €16.9 billion (December 31, 

2011: €17.5 billion), 14 percent below the average for 

the year. The average value for 2011 had been 12 percent 

higher than the value as at December 31, 2011. 

Given the efficiency of the workout process in the 

DZ BANK Group, the role played by calling in collateral 

during the course of workout procedures for 

non-performing borrowers was as negligible in 2012 as 

in 2011. The collateral called in amounted to a total of 

€65 million as at December 31, 2012 ( December 31, 

2011: €64 million).





117 

5.5.4. Collateralized lending volume 

Figure 16 shows the breakdown of collateralized lending 

volume at overall portfolio level by type of collateral 

and class of risk-bearing instrument. In the case 

of traditional lending business, figures are generally 

reported before the application of any offsetting agreements, 

whereas the collateralized exposures in the securities 

business and derivatives and money market 

business are shown net. 

Collateralized lending volume saw a year-on-year 

increase of 11 percent, mainly as a consequence of the 

change in the methods used by DG HYP. The underlying 

gross lending volume contracted by 2 percent, 

producing a collateralization rate as at December 31, 

2012 of 29 percent (December 31, 2011: 25 percent). 

In traditional lending business, the greatest proportion 

of collateralized lending volume – 73 percent as at 

December 31, 2012 (December 31, 2011: 68 percent) 

– was accounted for by lending secured by charges 

over physical assets such as land charges, mortgages, 

and registered ship mortgages. These types of collateral 

are particularly important for BSH, DG HYP, 

and DVB. In contrast, charges over physical assets are 

of lesser importance at DZ BANK because DZ BANK 

bases its lending decisions primarily on borrower 

credit quality. Other collateral mostly comprises asset 

collateral at VR-LEASING AG. 

In the securities business, there is generally no further 

collateralization to supplement the hedging activities 

already taken into account. Equally, in derivatives and 

money market business, collateral received under collateral 

agreements is already factored into the calculation 

of gross lending volume with the result that only 

a comparatively low level of collateral (personal and 

financial collateral) is then additionally reported. 

5.5.5. Sector structure of the credit portfolio 

The sectoral breakdown of the credit portfolio presented 

in figure 17 shows that the total volume of lending 

as at December 31, 2012 continued to be highly 

concentrated in the financial sector (41 percent), a situation 

that had changed little since December 31, 2011 

(42 percent). In addition to the local cooperative 

FIG. 16 – COLLATERALIZED LENDING VOLUME BY TYPE OF COLLATERAL 

Traditional lending 

business 

Securities business 

Derivatives and money 

market business 

Total 

€ billion 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Guarantees, indemnities, 

risk subparticipation 15.0 16.5 – – 0.4 0.3 15.4 16.8 

Credit insurance 1.3 1.3 – – – – 1.3 1.3 

Land charges, mortgages, 

ship mortgages 63.7 53.4 – – 0.1 0.1 63.8 53.5 

Pledged loans and advances, 

assignments, other pledged 

assets 1.4 1.3 – – – – 1.4 1.3 

Financial collateral 0.9 0.8 – – 0.1 0.4 1.0 1.2 

Other collateral 5.0 5.1 – – – – 5.0 5.1 

Collateralized lending 

volume 87.3 78.4 – – 0.6 0.8 88.0 79.1 

Gross lending volume 206.5 206.3 85.1 90.7 16.9 17.5 308.5 314.5 

Uncollateralized lending 

volume 119.1 127.9 85.1 90.7 16.3 16.7 220.5 235.3





banks, the borrowers in this customer s egment comprised 

banks from other sectors of the credit industry 

and other financial institutions. 

In its role as the central institution for the Volksbanken 

Raiffeisenbanken cooperative financial network, 

DZ BANK provides funding for the companies in the 

DZ BANK Group and for the local cooperative banks. 

For this reason, the local cooperative banks account 

for one of the largest loans and advances items in the 

DZ BANK Group’s credit portfolio. DZ BANK also 

supports the local cooperative banks in the provision 

of larger-scale funding to corporate customers. The 

resulting syndicated business, DZ BANK, DG HYP 

and DVB’s direct business with corporate customers in 

Germany and abroad, the retail real-estate business 

under the umbrella of BSH, and TeamBank’s consumer 

finance business determine the sectoral breakdown 

of the remainder of the portfolio. 

5.5.6. Geographical structure of the credit 

portfolio 

Figure 18 shows the geographical distribution of the 

credit portfolio by country group. Based on the new 

country breakdown issued by the IMF, the categories 

were extended in 2012 to include advanced economies 

and supranational institutions. Unlike in the IMF’s 

classification, the breakdown used here shows the traditional 

industrialized nations in a single category that 

also includes their dependent territories. This category 

does not include Iceland and Greece, which are assigned 

to the category of advanced economies owing 

to structural weaknesses. 

As at December 31, 2012, an unchanged 94 percent 

of the total lending volume was concentrated in Germany 

and in other western industrialized countries. 

5.5.7. Residual maturity structure of the credit 

portfolio 

Residual maturities in the overall credit portfolio 

The breakdown of the credit portfolio by residual 

maturity presented in figure 19 shows that the lending 

volume as at December 31, 2012 had fallen year on 

year by €4.9 billion in the short-maturity band, a 

decrease that was largely the result of the reduction 

in the volume of bond portfolios at DZ BANK. A reduction 

in the longer maturity bands is evident as 

a consequence of the strategic portfolio contraction 

and volume migration to shorter maturity bands at 

DG HYP. 

Lending volume past due but not impaired 

Figures 20 and 21 show the portion of the lending 

volume that is past due but not impaired. The disclosures 

relate for the most part to traditional lending 

business. 

FIG. 17 – LENDING VOLUME BY SECTOR, AVERAGE LENDING VOLUME 


business 




Total 

€ billion 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Financial sector 73.9 74.9 38.1 44.5 13.0 14.0 125.1 133.4 

Public sector 7.9 8.5 35.5 32.9 1.0 0.6 44.3 42.0 

Corporates 79.9 78.1 3.3 3.7 2.5 2.2 85.7 84.0 

Retail 40.6 40.4 5.1 6.1 – – 45.8 46.5 

Industry conglomerates 3.1 3.3 3.1 3.6 0.4 0.6 6.6 7.5 

Other 0.9 1.1 – – – – 0.9 1.1 

Total 206.5 206.3 85.1 90.7 16.9 17.5 308.5 314.5 

Average for the 

reporting period 205.8 200.8 86.0 92.3 19.6 15.3 311.4 308.3





119 

FIG. 18 – LENDING VOLUME BY COUNTRY GROUP 


business 




Total 

€ billion 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Germany 164.7 162.4 50.8 50.9 9.7 9.6 225.2 222.9 

Other industrialized nations 26.8 27.7 30.9 36.3 6.4 7.2 64.2 71.2 

Advanced economies 4.9 7.7 0.6 1.3 0.2 0.2 5.7 9.1 

Non-industrialized nations 10.0 8.6 0.9 0.7 0.2 0.2 11.1 9.5 

Supranational institutions – – 1.9 1.5 0.4 0.3 2.2 1.8 


FIG. 19 – LENDING VOLUME BY RESIDUAL MATURITY 


business 




Total 

€ billion 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

≤ 1 year 51.3 50.0 15.6 19.9 9.0 10.9 75.9 80.8 

> 1 year to ≤ 5 years 51.8 52.0 36.4 36.1 2.7 2.5 90.9 90.7 

> 5 years 103.4 104.3 33.1 34.7 5.2 4.1 141.7 143.0 


FIG. 20 – LENDING VOLUME PAST DUE BUT NOT IMPAIRED, BY SECTOR 


Past due up 

to 5 days 

Past due 

> 5 days 

to 1 month 

Past due 

> 1 month 

to 2 months 

Past due 

> 2 months 

to 3 months 

Past due 

> 3 months 

Total 

€ million 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Financial sector 357 44 299 3 3 1 – 1 4 7 662 56 

Public sector 52 17 1 – 1 1 1 – – – 56 19 

Corporates 244 212 232 429 74 502 94 55 365 226 1,008 1,425 

Retail 491 500 26 72 15 27 8 11 32 42 573 653 

Industry conglomerates – – – 6 – – – – – – – 6 

Other – – 2 4 1 2 1 1 1 2 5 10 

Total 1,144 774 561 515 93 534 104 68 403 278 2,304 2,168





FIG. 21 – LENDING VOLUME PAST DUE BUT NOT IMPAIRED, BY COUNTRY GROUP 


Past due up 

to 5 days 

Past due 

> 5 days 

to 1 month 

Past due 

> 1 month 

to 2 months 

Past due 

> 2 months 

to 3 months 

Past due 

> 3 months 

Total 

€ million 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Germany 1,095 732 341 103 82 196 46 44 125 167 1,688 1,241 

Other industrialized 

nations 31 16 15 196 – – 39 9 92 71 177 293 

Advanced economies – – 70 99 – 310 – 12 130 9 200 430 

Non-industrialized 

nations 18 26 134 116 11 28 19 3 56 30 239 204 

Supranational 

institutions – – – – – – – – – – – – 

Total 1,144 774 561 515 93 534 104 68 403 278 2,304 2,168 

FIG. 22 – LENDING VOLUME BY RATING CLASS 


business 




Total 


Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

€ billion 

1A 10.2 11.1 33.8 39.0 4.6 3.1 48.5 53.3 

1B 0.7 0.7 5.0 5.2 0.5 0.5 6.2 6.5 

1C 65.8 65.3 11.4 12.1 4.8 5.1 81.9 82.5 

1D 1.2 1.1 3.4 3.8 0.7 0.9 5.3 5.7 

1E 1.1 1.2 0.9 1.2 0.1 0.7 2.1 3.1 

2A 6.7 6.9 1.9 4.2 1.2 0.9 9.7 12.0 

2B 11.3 12.9 8.2 7.9 0.9 1.9 20.3 22.7 

2C 6.8 6.8 6.8 6.9 1.5 1.7 15.1 15.4 

2D 9.8 9.5 3.0 2.7 0.6 0.6 13.4 12.8 

2E 12.3 11.1 3.1 2.1 0.7 0.8 16.1 14.0 

3A 11.7 11.6 2.4 1.0 0.3 0.3 14.4 12.8 

3B 15.9 15.7 0.4 0.8 0.2 0.1 16.5 16.7 

3C 11.7 10.2 1.8 1.1 0.1 0.1 13.5 11.5 

3D 8.0 8.4 0.9 0.3 0.1 0.2 9.0 8.9 

3E 8.3 9.3 0.4 0.3 0.1 – 8.8 9.6 

4A 2.6 2.2 0.4 0.3 – – 3.0 2.5 

4B 1.5 1.6 0.2 0.2 – – 1.8 1.8 

4C 4.4 4.8 0.3 0.1 – – 4.7 5.0 

4D 5.1 5.3 – – – – 5.2 5.3 

4E 4.7 4.4 0.7 0.9 0.1 0.1 5.5 5.4 

Default 5.4 4.7 0.1 0.3 0.1 – 5.5 5.1 

Not rated 1.4 1.5 0.1 0.1 0.4 0.4 1.9 2.0 


Non-investment grade





121 

FIG. 23 – INVESTMENTS HELD BY INSURANCE COMPANIES BY RATING CATEGORY AND BORROWER GROUP 


Non-investment 

grade 

Default Not rated¹ Total 

€ billion 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Financial sector 26.6 25.5 0.8 0.6 – – 2.3 – 29.8 26.1 

Public sector 13.4 11.9 0.7 0.7 – – – – 14.1 12.6 

Corporates 4.8 3.4 0.1 0.1 – – 2.4 – 7.3 3.5 

Other 7.1 5.9 – – – – 0.6 4.6 7.7 10.4 

Total 51.9 46.7 1.6 1.3 – – 5.3 4.6 58.8 52.6 

1 The ‘not rated’ column largely comprises variable-yield securities, predominantly equities and investment fund shares/units. 

Because of the conservative risk provisioning policy 

of the companies in the DZ BANK Group, past-due 

loans only account for a relatively small proportion of 

the overall credit portfolio. 

The increase in the lending volume past due but not 

impaired was particularly attributable to technical 

adjustments at DG HYP. The past-due loans in arrears 

by more than 3 months amounting to €403 million 

(December 31, 2011: €278 million) were predominantly 

loans secured by mortgages. 

5.5.8. Rating structure of the credit portfolio 

Rating structure of the total lending volume 

Figure 22 shows the DZ BANK Group’s lending 

volume by rating class according to the credit rating 

master scale. ‘Not rated’ comprises counterparties 

for which a rating classification is not required. 

The proportion of the total credit portfolio accounted for 

by rating classes 1A to 3A (investment grade) was 76 percent 

as at December 31, 2012 (December 31, 2011: 

77 percent). The proportion of the total lending volume 

accounted for by rating classes 3B to 4E (non-investment 

grade) was 22 percent as at December 31, 2012 (December 

31, 2011: 21 percent). Defaults in rating classes 5A to 

5E as at December 31, 2012 accounted for 2 percent of 

the DZ BANK Group’s total lending volume and thus 

remained at the low level of the previous year. 

Rating structure of investments held by insurance 

companies 

The credit rating breakdown for investments held 

by insurance companies by borrower group is shown 

in figure 23. As at December 31, 2011, investments 

amounting to a total of €4.6 billion had not been 

rated as part of the R+V credit rating system and were 

shown under the ‘Other’ borrower group. As at December 

31, 2012, the majority of these investments 

had been assigned to the Corporates category, with 

equities accounting for €2.5 billion and investment 

fund units €1.4 billion. The change in exposures in the 

financial sector (up by 14 percent) and in the public 

sector (up by 12 percent) formed part of the overall 

growth in investments since December 31, 2011 

(12 percent). 

Single-borrower concentrations 

As at December 31, 2012, the ten counterparties associated 

with the largest lending volumes accounted for 

8 percent of the DZ BANK Group’s total lending 

exposure, so there was no change in this situation 

compared with the end of 2011. These counterparties 

comprised exclusively financial-sector and public-sector 

borrowers domiciled in Germany. All these exposures 

consisted of investment-grade lending with a 

rating of 2C or better. 

Investment-grade lending volume 

Figures 24 and 25 show the lending volume that is 

neither impaired nor past due, i.e. the investmentgrade 

proportion of the total credit portfolio. 

This portion of the portfolio accounted for 98 percent 

of the overall lending volume as at December 31, 2012, 

unchanged from the previous year. The large proportion 

of investment-grade business is attributable to the 

risk-conscious lending policy that the group continued 

to pursue in 2012.





FIG. 24 – LENDING VOLUME NEITHER IMPAIRED NOR PAST DUE, 

BY SECTOR 

FIG. 25 – LENDING VOLUME NEITHER IMPAIRED NOR PAST DUE, 

BY COUNTRY GROUP 

Total portfolio 

Portfolio neither 

impaired nor past due 

Total portfolio 

Portfolio neither 

impaired nor past due 

€ billion 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

€ billion 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Financial sector 125.1 133.4 124.1 133.0 

Public sector 44.3 42.0 44.3 42.0 

Corporates 85.7 84.0 81.8 80.1 

Retail 45.8 46.5 44.1 44.9 

Industry 

conglomerates 6.6 7.5 6.6 7.5 

Other 0.9 1.1 0.9 1.1 

Total 308.5 314.5 301.8 308.5 

Germany 225.2 222.9 221.2 219.5 

Other industrialized 

nations 64.2 71.2 63.0 69.9 

Advanced 

economies 5.7 9.1 5.1 8.4 

Non-industrialized 

nations 11.1 9.5 10.3 9.1 

Supranational 

institutions 2.2 1.8 2.2 1.8 

Total 308.5 314.5 301.8 308.5 

5.5.9. Allowances for losses on loans and 

advances, non-performing loans 

Allowances for losses on loans and advances 

Figures 26 to 33 show the change in allowances (specific 

loan loss allowances, including the specific loan 

loss allowances evaluated on a group basis and portfolio 

loan loss allowances), the provisions for loan 

commitments, and liabilities under financial guarantee 

contracts in 2012 and 2011 for the entire credit portfolio 

of the companies in the DZ BANK Group. 

Except for the portfolio loan loss allowances, these 

figures are presented in separate breakdowns by sector 

and by country group. 

The components of the allowances, impairment 

losses, and provisions shown in the tables are also 

disclosed in the notes to the consolidated financial 

statements. Discrepancies between the amounts 

shown in the risk report and those reported in the 

notes are primarily attributable to differences in 

the scope of consolidation. 

Over the course of 2012, the DZ BANK Group increased 

its specific loan loss allowances by €216 million 

(2011: net decrease of €139 million). DZ BANK 

reported a net addition to specific loan loss allowances 

in 2012 (2011: net reduction). Despite individual allowances 

relating to project finance and corporate banking 

– but on the other hand also as a result of the reversal 

of allowances following successful turnarounds 

– DZ BANK’s allowances for losses on loans and advances 

remained within anticipated levels and therefore, 

overall, reflected the strength of the credit portfolio 

and the sustainable, rigorous risk policy operated 

by DZ BANK. 

Portfolio loan loss allowances saw a net reversal of 

€7 million (2011: net addition of €194 million). 

Despite the effects of the sovereign debt crisis on 

economic conditions, the generally positive macroeconomic 

trends in 2012 enabled the DZ BANK 

Group to post a net reversal of provisions amounting 

to €29 million (2011: net reversal of €7 million). 

The reversal of the provisions was attributable almost 

entirely to DZ BANK. 

Provisions for loan commitments are a component 

of the ‘Provisions’ balance sheet item. Liabilities under 

financial guarantee contracts are reported under 

‘Other liabilities’ on the balance sheet.





123 

FIG. 26 – ALLOWANCES FOR LOSSES ON LOANS AND ADVANCES, DIRECT IMPAIRMENT LOSSES, BY SECTOR – 2012 

€ million 

Balance 

as at 

Jan. 1, 

2012 

Additions 

Utilizations 

Reversals 

Interest 

income 

Other 

changes 

Balance 

as at 

Dec. 31, 

2012 

Directly 

recognized 

impairment 

losses 

Receipts 

from 

loans and 

advances 

previously 

impaired 

Specific loan loss allowances¹ 

Financial sector 235 66 -37 -45 -1 -13 205 1 -3 

Public sector – – – – – – – – – 

Corporates 1.083 591 -191 -278 -32 64 1,236 38 -46 

Retail 429 231 -68 -83 -7 -2 501 55 -25 

Industry conglomerates – – – – – – – – – 

Other 14 32 -1 -1 – -9 35 – -8 

Total specific loan loss allowances 1 1,761 920 -297 -407 -40 40 1,977 94 -82 

Portfolio loan loss allowances 539 149 – -156 – – 532 – – 

Total loan loss allowances 2,299 1,069 -297 -563 -40 40 2,509 94 -82 

1 Including specific loan loss allowances evaluated on a group basis 

FIG. 27 – ALLOWANCES FOR LOSSES ON LOANS AND ADVANCES, DIRECT IMPAIRMENT LOSSES, BY SECTOR – 2011 

€ million 

Balance 

as at 

Jan. 1, 

2011 

Additions 

Utilizations 

Reversals 

Interest 

income 

Other 

changes 

Balance 

as at 

Dec. 31, 

2011 

Directly 

recognized 

impairment 

losses 

Receipts 

from 

loans and 

advances 

previously 

impaired 


Financial sector 208 67 -6 -38 -2 6 235 1 – 

Public sector – – – – – – – – – 

Corporates 1,117 527 -187 -380 -26 33 1,083 37 -36 

Retail 548 190 -78 -218 -7 -6 429 60 -23 

Industry conglomerates – – – – – – – – – 

Other 26 28 -1 -2 – -37 14 1 -5 

Total specific loan loss allowances 1 1,899 812 -272 -639 -36 -4 1,761 100 -64 

Portfolio loan loss allowances 346 309 – -114 – -2 539 – – 

Total loan loss allowances 2,245 1,121 -272 -752 -36 -5 2,299 100 -64 

1 Including specific loan loss allowances evaluated on a group basis





FIG. 28 – PROVISIONS FOR LOAN COMMITMENTS AND LIABILITIES UNDER FINANCIAL GUARANTEE CONTRACTS AND 

LOAN COMMITMENTS, BY SECTOR – 2012 

Balance as at 

Jan. 1, 2012 

Additions Utilizations Reversals Other 

changes 

Balance as at 

Dec. 31, 2012 

€ million 

Financial sector 8 – – -2 – 7 

Public sector – – – – – – 

Corporates 94 28 – -42 10 89 

Retail 17 – – -14 – 3 

Industry conglomerates – – – – – – 

Other 56 – -2 -8 – 46 

Total 174 28 -2 -66 10 145 


LOAN COMMITMENTS, BY SECTOR – 2011 

Balance as at 

Jan. 1, 2011 


changes 

Balance as at 

Dec. 31, 2011 

€ million 

Financial sector 21 11 – -24 1 8 


Corporates 110 34 – -51 – 94 

Retail 2 15 – – – 17 

Industry conglomerates – – – – – – 

Other 48 20 – -13 – 56 

Total 181 80 – -88 1 174 

FIG. 30 – ALLOWANCES FOR LOSSES ON LOANS AND ADVANCES, DIRECT IMPAIRMENT LOSSES, BY COUNTRY GROUP – 2012 

Balance 

as at 

Jan. 1, 

2012 

Additions Utilizations 

Reversals Interest 

income 

Other 

changes 

Balance 

as at 

Dec. 31, 

2012 

Directly 

recognized 

impairment 

Receipts 

from 

loans and 

advances 

previously 

€ million 

losses impaired 


Germany 1,045 479 -175 -207 -23 45 1,164 63 -71 

Other industrialized nations 587 264 -97 -103 -17 -276 358 14 -5 

Advanced economies – 20 -11 -35 – 173 147 – – 

Non-industrialized nations 128 157 -13 -62 – 99 309 17 -6 

Supranational institutions – – – – – – – – – 

Total specific loan loss allowances 1 1,760 920 -296 -408 -40 41 1,977 94 -82 

Portfolio loan loss allowances 539 149 – -156 – – 532 – – 

Total loan loss allowances 2,299 1,069 -296 -564 -40 41 2,509 94 -82 

1 Including specific loan loss allowances evaluated on a group basis





125 

FIG. 31 – ALLOWANCES FOR LOSSES ON LOANS AND ADVANCES, DIRECT IMPAIRMENT LOSSES, 

BY COUNTRY GROUP – 2011 

€ million 

Balance 

as at 

Jan. 1, 

2011 

Additions 

Utilizations 

Reversals 

Interest 

income 

Other 

changes 

Balance 

as at 

Dec. 31, 

2011 

Directly 

recognized 

impairment 

losses 

Receipts 

from 

loans and 

advances 

previously 

impaired 


Germany 1,230 389 -170 -374 -24 -5 1,045 65 -42 

Other industrialized nations 522 406 -102 -249 -11 21 587 34 -22 

Advanced economies – – – – – – – – – 

Non-industrialized nations 148 18 -1 -16 – -20 128 – – 

Supranational institutions – – – – – – – – – 

Total specific loan loss allowances 1 1,899 812 -272 -639 -36 -4 1,760 100 -64 

Portfolio loan loss allowances 345 309 – -114 – -2 539 – – 

Total loan loss allowances 2,245 1,121 -272 -752 -36 -5 2,299 100 -64 

1 Including specific loan loss allowances evaluated on a group basis 


LOAN COMMITMENTS, BY COUNTRY GROUP – 2012 

Balance as at 

Jan. 1, 2012 


changes 

Balance as at 

Dec. 31, 2012 

€ million 

Germany 139 22 – -47 5 119 

Other industrialized nations 33 3 -2 -4 -19 11 

Advanced economies – – – – – – 

Non-industrialized nations 2 3 – -15 24 14 

Supranational institutions – – – – – – 

Total 174 28 -2 -67 10 145 


LOAN COMMITMENTS, BY COUNTRY GROUP – 2011 

Balance as at 

Jan. 1, 2011 


changes 

Balance as at 

Dec. 31, 2011 

€ million 

Germany 113 47 – -59 38 139 

Other industrialized nations 21 31 – -29 11 33 

Advanced economies – – – – – – 

Non-industrialized nations 47 2 – – -48 2 


Total 181 80 – -88 1 174





FIG. 34 – IMPAIRED LENDING VOLUME, BY SECTOR 

Amount before specific loan 

loss allowances 

Impaired lending volume 

Specific loan loss allowances 

Amount after specific loan 


€ million Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 

Financial sector 284 300 205 235 79 65 


Corporates 2,885 2,443 1,236 1,083 1,649 1,360 

Retail 1,121 992 501 429 620 562 

Industry conglomerates 7 3 – – 7 3 

Other 40 18 35 14 5 4 

Total 4,340 3,755 1,977 1,761 2,363 1,994 

FIG. 35 – IMPAIRED LENDING VOLUME, BY COUNTRY GROUP 

Amount before specific loan 



Specific loan loss allowances 

Amount after specific loan 


€ million Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 

Germany 2,349 2,160 1,164 1,045 1,185 1,115 

Other industrialized nations 986 1,011 358 587 628 424 

Advanced economies 417 302 147 – 270 302 

Non-industrialized nations 588 282 309 128 279 153 


Total 4,340 3,755 1,977 1,761 2,363 1,994 


Figures 34 and 35 show the impaired lending volume. 

The disclosures relate for the most part to traditional 

lending business. As at December 31, 2012, the lending 

volume after allowances and impairment losses 

had risen to €2,362 million (December 31, 2011: 

€1,994 million), which was mainly attributable to 

increases at DZ BANK in the Corporates sector. 

5.5.10. Volume of renegotiated loans 

Where loans have been renegotiated, this has been 

done in order to restructure contractual conditions so 

as to avoid the loans becoming past due or impaired. 

Early intervention and the provision of intensified loan 

management in the case of non-performing loans and a 

systematic workout management system mean that the 

volume of renegotiated loans in the DZ BANK Group 

is, to all intents and purposes, of minor significance. 

Shipping finance deserves special mention in this context. 

The persistently challenging economic climate, 

changes in the volume of global trade, and a surplus of 

available tonnage in most shipping segments have led 

to sustained pressure on charter rates and on borrowers’ 

debt service capacity. These trends resulted in a 

number of loans having to be renegotiated in the 

reporting year. 

As at December 31, 2012, the volume of renegotiated 

loans amounted to €645 million (December 31, 2011: 

€562 million) out of a total lending volume of 

€308 billion (December 31, 2011: €314.5 billion).





127 

5.6. Credit portfolios with 

increased risk content 

The following disclosures relating to exposures and 

adjustments in subportfolios also form part of the 

above analyses of the entire credit portfolio. However, 

a separate analysis of these subportfolios has been 

included because of their significance for the risk 

position in the DZ BANK Group. 

5.6.1. European sovereign debt crisis 

Changes in economic conditions in 2012 

Substantial budget deficits remain a feature of the 

euro-zone economies of Portugal, Ireland, Greece, and 

Spain, and these deficits are accompanied by government 

debt levels that are high in relation to gross 

domestic product. The ratio of national indebtedness 

to gross domestic product also remains high in Italy, 

although the Italian government has enjoyed a significant 

degree of success in reducing the budget deficit. 

In Greece, government debt remains at an unsustainable 

level of almost 180 percent of gross domestic 

product, even after the partial debt write-off by foreign 

creditors in March 2012, and the trend remains 

upward for 2013. The need for further debt rescheduling 

cannot therefore be ruled out. 

The Portuguese government has demonstrated its determination 

to implement the fiscal consolidation policy 

agreed with the EU and IMF. Portugal’s economy 

is continuing to suffer from considerable structural 

weaknesses and a poor level of competitiveness. The 

structural reform of the labor market, administration, 

and judiciary agreed as part of the bailout package is 

likely to help bolster Portuguese competitiveness, but 

is only expected to deliver results in the medium term. 

The Irish government is also pursuing a strict policy 

of austerity and the spending cuts that it has imposed 

are beginning to bear fruit. Restructuring in the 

banking sector is progressing little by little. Nevertheless, 

public finances continue to be at some risk 

from the situation in the financial sector as banks are 

adversely impacted by increasing loan defaults in their 

real-estate business. A retroactive recapitalization of 

Irish banks via the ESM would take some of the pressure 

off public finances and mean that spending cuts 

do not need to be as harsh. Ireland took over the EU 

Council Presidency in January 2013 and it therefore 

intends to make the most of this opportunity to win 

appropriate concessions from the EU. 

Unlike Greece, Italy has a broad industrial base. The 

policy of budget consolidation pursued by Mario 

Monti’s government, which has been in office since 

December 2011, has strengthened confidence in financial 

markets. 

The Spanish government can demonstrate some success 

in reducing its budget deficit, but government 

debt nevertheless continues to rise and could reach 

around 90 percent of gross domestic product in 2013. 

Spain is reliant on financial support from the EU to 

rescue its banking system and at the beginning of June 

2012 received a commitment for assistance worth up 

to €100 billion. 

Based on current assessments, it does not appear that 

the other countries in the euro zone referred to above 

will be faced with a situation similar to that in Greece, 

although this does not apply to Cyprus. 

Among the other countries on the periphery of the 

European sovereign debt crisis, Hungary and Slovenia 

are particularly vulnerable to trends in international 

financial markets and a possible deterioration in the 

options available to them for refinancing their national 

debt. 

Exposure of the DZ BANK Group 

In 2012, the DZ BANK Group achieved further significant 

reductions in its exposure to counterparties in 

countries hit directly by the European sovereign debt 

crisis. Loans and advances in this subportfolio 

amounted to a total of €12,649 million as at December 

31, 2012 (December 31, 2011: €16,381 million), 

which constituted a year-on-year decrease of 33 percent. 

Figure 36 shows the borrower structure by 

credit-risk-bearing instrument.





FIG. 36 – LOANS AND ADVANCES TO BORROWERS IN THE COUNTRIES PARTICULARLY AFFECTED BY THE SOVEREIGN DEBT CRISIS 

Traditional lending Securities business Derivatives and money 

business 1 market business 

Total 

€ million 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Dec. 31, 

2012 

Dec. 31, 

2011 

Portugal 140 131 848 984 3 7 992 1,121 

of which: public sector – – 606 464 – – 606 464 

of which: non-public sector 140 131 242 520 3 7 385 657 

of which: financial sector – – 127 384 3 7 130 391 

Italy 327 443 3,388 3,675 87 192 3,802 4,310 

of which: public sector – – 2,082 1,760 – – 2,082 1,760 

of which: non-public sector 327 443 1,306 1,915 87 192 1,719 2,550 

of which: financial sector 42 78 820 1,320 78 181 940 1,579 

Ireland 1,011 867 359 635 255 417 1,625 1,918 


of which: non-public sector 1,011 867 307 585 255 417 1,572 1,868 

of which: financial sector – – 194 391 253 416 447 807 

Greece 303 939 113 465 – – 416 1,405 


of which: non-public sector 303 939 51 200 – – 354 1,140 

of which: financial sector 1 7 3 64 – – 4 71 

Spain 505 448 5,277 7,128 33 50 5,815 7,627 

of which: public sector 62 65 2,376 3,086 – – 2,438 3,151 

of which: non-public sector 442 383 2,901 4,042 33 50 3,377 4,475 

of which: financial sector 67 70 1,592 2,419 32 50 1,691 2,539 

Total 2,285 2,827 9,986 12,888 378 666 12,649 16,381 

of which: public sector 63 65 5,178 5,626 – – 5,241 5,691 

of which: non-public sector 2,223 2,762 4,807 7,262 378 666 7,408 10,690 

of which: financial sector 110 156 2,736 4,577 365 654 3,212 5,387 

1 Unlike the other presentations of lending volume, traditional lending business in this case includes equity investments; excluding R+V loans and advances 

As at December 31, 2012, the lending volume extended 

to counterparties in Cyprus, Hungary, and 

Slovenia in total accounted for less than 1 percent of 

the DZ BANK Group’s total lending volume, a low 

level similar to that at the end of 2011. 

5.6.2. Impact of the financial crisis 

Securitization portfolio 

The changes in the securitization portfolio in 2012 

were largely in line with expectations, whether in 

terms of redemptions, rating migrations, or the performance 

of the portfolio. One of the factors worth 

highlighting is the increase in house prices in the USA 

and the associated recovery in US RMBS prices. The 

companies in the DZ BANK Group made the most of 

the more benign market environment during the 

course of 2012 to step up their efforts to actively scale 

back the portfolio. The rating migrations were largely 

triggered by the downgrading of country ratings as a 

consequence of the sovereign debt crisis in the euro 

zone. However, the rating migrations did not appear 

to be accompanied by any material deterioration in 

performance.





129 

The fair value of the DZ BANK Group’s securitization 

exposure as at December 31, 2012 amounted to 

€10.8 billion after having been as high as €12.6 billion 

as at December 31, 2011. This equates to a reduction 

of 14 percent (2011: reduction of 19 percent). The reduction 

in the fair value of the portfolios held by the 

group was largely the result of redemptions and disposals. 

These changes offset the increases in value derived 

from the recovery in prices. Since December 31, 

2008, the securitization exposure has been cut by a 

total of 56 percent. 

As at December 31, 2012, 54 percent (December 31, 

2011: 53 percent) of the loans and advances in the 

reference portfolios were to borrowers in European 

countries, in particular the United Kingdom, Ireland, 

Germany, Spain, and the Netherlands. A further 

39 percent of borrowers were domiciled in the US, as 

had also been the case as at December 31, 2011. 

The credit rating awarded to each securitization is 

based on the lowest available rating issued by the rating 

agencies Standard & Poor’s, Moody’s, and Fitch. 


2011: 40 percent) of the securitization exposure on 

the balance sheet consisted of AAA tranches rated by 

external credit agencies. A total of 75 percent (December 

31, 2011: 80 percent) was rated as investment 

grade (up to BBB-). 

Within the total exposure at the end of the financial 

year, €3.0 billion (December 31, 2011: €3.5 billion) 

was related to exposures to conduits. Of this amount, 

71 percent (December 31, 2011: 66 percent) was accounted 

for by undrawn liquidity lines to conduits. 


2011: 82 percent) of securitization exposure to conduits 

was in external rating class A or higher. 

Securitization exposure rated as AAA or AA accounted 

for 17 percent of the total exposure to conduits 

as at December 31, 2012 (December 31, 2011: 

23 percent). Rating classes BBB+ to B- made up 

24 percent (December 31, 2011: 16 percent) of the 

total exposure to conduits as at December 31, 2012. 

Securitization exposures in the CDO product category 

amounted to €1.0 billion as at December 31, 2012 

(December 31, 2011: €1.1 billion). Loans and advances 

in the subprime portfolio totaled €0.8 billion as at 

the balance sheet date, which was the same level as at 

December 31, 2011, one of the main reasons being the 

rallying of the markets. As at December 31, 2012, 

the volume of assets insured by monoliners remained 

negligible and therefore unchanged year on year. 

Figure 37 summarizes the changes in the securitization 

portfolio in 2012, broken down by changes in 

FIG. 37 – CHANGES IN THE COMPOSITION AND VALUE OF THE SECURITIZATION PORTFOLIO 

€ million 

Fair value as at 

Jan. 1, 2012 

before changes 

in composition 

and value 

Changes in 

composition due to 

purchases, sales, 

redemptions, and 

exchange-rate 

fluctuations 

Changes in value 

Fair value as at 

Dec. 31, 2012 

after changes 

in composition 

and value 

Receivables from retail loans 6,093 -1,432 495 5,155 

of which: RMBSs 5,674 -1,345 496 4,825 

of which: assets classified as subprime 826 -223 182 785 

of which: assets classified as Alt-A 240 -110 25 155 

Receivables from corporate loans 1 379 -1 11 389 

Receivables from CMBSs 1,629 -445 124 1,308 

Receivables from CDOs 2 1,069 -180 64 953 

Total exposure reported on the balance sheet 9,170 -2,057 693 7,806 

Exposures to conduits 3 3,471 -511 – 2,959 

Total 12,641 -2,569 693 10,765 

1 Including receivables from purchased leased assets amounting to €40 million (Dec. 31, 2011: €56 million) 

2 CDOs = collateralized debt obligations 

3 Including reported receivables from conduits, especially ABCP conduits, and liquidity facilities provided for ABCP conduits





portfolio composition and changes in fair value. As 

at December 31, 2012, there had been an overall increase 

in fair value of €693 million, largely attributable 

to the recovery in prices (December 31, 2011: decrease 

in fair value of €587 million). 

Leveraged finance portfolio 

Of all the entities in the DZ BANK Group, only 

DZ BANK is involved in the leveraged finance product 

segment on a significant scale. DZ BANK classifies 

mergers & acquisitions and related types of financing 

that involve an above-average level of gearing 

(‘leverage’) as leveraged finance transactions. These 

primarily include the types of acquisition finance 

listed below, especially for private equity companies 

whose credit ratings essentially depend on the cash 

flows expected to be generated by the acquired companies. 

During the course of a regular review, the base 

data in the leveraged finance portfolio was extended 

in 2012 to include a further 17 entities. 

DZ BANK distinguishes between the following types 

of transaction: 

– leveraged buyouts by financial sponsors 

– recapitalization and funding of acquisitions 

– management buyouts and management buyins. 

DZ BANK also arranges and underwrites this type 

of acquisition finance. 

The following disclosures relate to the gross lending 

volume of leveraged finance transactions, which is 

based on carrying amounts and does not include 

credit risk mitigation techniques or the recognition 

of loan loss allowances. The amounts shown for December 

31, 2011 have been restated using the new 

base data. 

The loan commitments granted by DZ BANK in 

this product segment totaled €1.5 billion as at December 

31, 2012 (December 31, 2011: €1.6 billion). Of this 

total, loans amounting to €1.2 billion (December 31, 

2011: €1.1 billion) had already been drawn down and 

outstanding loan commitments came to €325 million 

(December 31, 2011: €432 million). The leveraged finance 

portfolio was hedged by credit derivatives and 

guarantees in the amount of €2 million at the balance 

sheet date (December 31, 2011: €19 million). As at December 

31, 2012, the exposures in the portfolio revealed 

a broad sectoral diversification, with over 80 percent 

relating to companies based in the European Union, as 

indeed had also been the case at the end of 2011. 

Impairment losses of €47 million (2011: €37 million) 

were recognized for this portfolio in the reporting year. 

5.6.3. Targeted management action 

Since the start of the financial crisis, the DZ BANK 

Group has stepped up the monitoring of its credit 

portfolio, with attention focused on exposure to the 

financial sector and to selected countries and regions 

of the world. Individual exposures are subject to intensified 

loan management using standard processes 

within the workout management system. The risks 

in subportfolios are monitored and analyzed with 

regular reports. 

The companies in the DZ BANK Group have recognized 

adequate allowances for losses on loans and advances 

in respect of exposures in countries particularly 

affected by the European sovereign debt crisis as well 

as in respect of the securitization portfolio and the 

leveraged finance portfolio. 

5.7. Risk position 

The amount of capital required to cover credit risk is 

based on a number of factors, including the size of 

single-borrower exposures, individual ratings, and the 

industry sector of each exposure. As at December 31, 

2012, the risk capital requirement in the DZ BANK 

Group amounted to €2,843 million (December 

31, 2011: €3,526 million). The DZ BANK Group 

also set an upper loss limit of €3,711 million (December 

31, 2011: €4,309 million). 

The fall in the risk capital requirement reflected the 

slight contraction in lending volume during 2012. 

The decrease in the risk capital requirement was attributable 

to various effects over the course of the year and 

was mostly accounted for by DZ BANK. The upper 

loss limit was not exceeded at any time during 2012. 

Figure 38 shows the lending volume and the associated 

risk capital requirement, by sector.





131 

FIG. 38 – LENDING VOLUME AND CAPITAL REQUIREMENT FOR 

CREDIT RISK, BY SECTOR 

Risk capital 

requirement 

(€ million) 

Dec. 31, 

2012 

Dec. 31, 

2011 

Lending volume 

(€ billion) 

Dec. 31, 

2012 

Dec. 31, 

2011 

Financial sector 997 1,111 125.1 133.4 

Public sector 211 157 44.3 42.0 

Corporates 920 1,267 85.7 84.0 

Retail 561 865 45.8 46.5 

Industry 

conglomerates 121 78 6.6 7.5 

Other 33 49 0.9 1.1 

Total 2,843 3,526 308.5 314.5 

In addition, DZ BANK intends to carry out a further 

optimization of the internal credit risk measurement 

system in 2013. 

In the current year, the DZ BANK Group will continue 

to implement the risk-strategy approach to 

lending business that it has already initiated. It is also 

planned to continue to scale back non-network activities. 

At DZ BANK this is consistent with further 

stepping up structured business with the cooperative 

financial network and selected customers. In addition, 

the group plans to significantly increase its market 

share in SME business and strengthen its positioning 

in this segment in Germany, especially in the 

medium-sized company subsegment. 

5.8. Summary and outlook 

In 2012, all internal rating systems and the rating 

systems approved by the banking regulators for compliance 

under SolvV were validated in detail. Existing 

rating systems for the project finance, acquisition finance, 

and major corporate customer segments were 

refined. For 2013, efforts will be made to obtain IRBapproach 

approval for the newly introduced rating 

system for investment funds to be used at DZ BANK. 

It is also planned to apply for IRB-approach approval 

for other rating systems that have already been developed 

and that are already used for internal management 

purposes. 

As in 2011, a key area of collateral management activity 

was the enhancement of data quality. To this end, 

further action plans were implemented in DZ BANK’s 

collateral management system to increase efficiency 

and transparency. These action plans focused on extended 

plausibility tests, new combinations of collateral 

agreements and assets, reporting adjustments, and 

technical enhancement and optimization of data delivery. 

DZ BANK also continued to translate requirements 

for the refinement of the collateral management 

system into functional specifications. In 2013, further 

development of the collateral management system at 

DZ BANK will focus on the implementation of new 

regulatory requirements (CRR, CRD IV). Changes in 

collateral processing within the joint credit business 

are also planned. 

6. Equity risk 

In the DZ BANK Group, equity risk is understood to 

be the risk of losses arising from negative changes in 

the fair value of that portion of the long-term equity 

investments portfolio in which the risks are not covered 

by other types of risk. Within the DZ BANK 

Group, equity risk arises primarily at DZ BANK and 

to a lesser extent at BSH and R+V. 

The equity investments listed in the banking book 

are largely held for strategic reasons. Companies 

in which DZ BANK, BSH, and R+V hold strategic 

investments normally cover markets, market segments, 

or parts of the value chain in which they or 

the local cooperative banks are not active. These 

investments therefore support the sales activities of 

the cooperative banks or help reduce costs by bundling 

functions. The investment strategy is continuously 

aligned with the needs of cooperative financial 

network policy. 

In addition, the strategic investments held by R+V 

help to support sales and marketing and the geographical 

diversification of the insurance business 

by means of investments in international markets. 

R+V investments in banks within the Volksbanken 

Raiffeisenbanken cooperative financial network 

also form part of the strategic investments.

5. CREDIT RISK - DZ BANK Gruppe

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